Focus raises roof on real estate

An exhausted but well-composed John Ritter, CEO of Focus Property Group, said he was near his top bid when rivals from Pulte Homes announced their withdrawal from a protracted bidding war, allowing Focus to acquire 1,940 acres for residential development in southwestern Henderson for $557 million -- $307 million above the minimum bid that drew no takers at last November's auction.

The transaction was the culmination of Wednesday's record-setting Bureau of Land Management auction, which left many spectators and speculators wondering: Where is the ceiling on Southern Nevada real estate prices?

The sale of the giant tract between the Anthem master-planned community and Interstate 15 capped off the most successful BLM auction to date: 71 parcels adding up to 2,532 acres sold for a total of $709.2 million, slightly more than the $700.5 million from the 16 previous auctions combined.

"A lot has happened in the last six months all over the valley," Merv Boyd of the BLM said, suggesting rapid appreciation in housing prices since the last auction improved the federal agency's fortunes.

Following the auction, Ritter answered the question murmured throughout the Sam's Town Live! auditorium by spectators of the seemingly endless bidding contest: Why pay more than half a billion dollars today and not $250 million just six months ago?

"We're asking ourselves that right now," said Ritter, who went on to explain that his company didn't have the financing in place late last year that it does now and added that higher home prices in the past six months raised the maximum acceptable price significantly.

"I think the price we paid is reasonable given the parcel. Timing is everything. ... We had our hands full at the time of the last auction. This time around we had all of our builder partners in advance so we came in more confident."

Ritter named the home builders who have signed on to the project: Pardee Homes, Woodside Homes, Beazer Homes, Kimball Hill Homes, KB Home, Toll Bros. and Meritage Homes.

The price is almost five times greater than the previous record bid for BLM land -- $113.5 million, which Focus paid for 485 acres in northwest Las Vegas a year ago.

"This is a high price. Honestly, I didn't expect it would get this high," Ritter said.

Ritter, a veteran of previous auctions, used timeouts, whispered consultations with staff, and shifting bid increments to try to shake his rivals -- even bluffing in media reports before the auction.

Bid exchanges started slowly between Focus and Pulte. Crowds formed around the two parties as it became apparent they were the only two participants.

Ritter maintained a thousand-mile stare and sipped ice water between shouts as he stood between stands in the small venue.

Pulte executives Sheryl Palmer and Scott Middleton sat near the top of an adjoining bleacher and chatted frequently.

Bidding appeared to reach a crescendo several times, slowing at $10 million before the $400 million mark, before accelerating again. Action stopped entirely on a few occasions as both parties held impromptu powwows. At a few milestones, notably the half-billion dollar mark, the crowd erupted in applause.

At times, bid increments were downright petty -- Pulte drew jeers for $100,000 increases at several points. Ritter drew laughs with a retort of "plus $50,000" at a point when the bidding was already well over $500 million.

"I thought we'd be there until three or four in the afternoon," Ritter said.

"It's nerve-wracking. It's especially nerve-wracking beforehand. I enjoy it, obviously. I keep doing it."

In the end, however, it came down to the company willing to reach deeper into its pockets. The cost does not include infrastructure expenses, which may add up to more than $200 million.

The winning bidder is required to enter a development agreement with the city to build a master-planned community. Ritter said actual home sales are more than two years away.

The cost left many wondering how expensive the homes offered for sale on the land would ultimately cost. Ritter suggested higher density land use -- more homes per acre and more "verticality" -- may be the answer. "That's what you've seen other communities do."

Roughly a dozen parcels into the action, auctioneer Mike McKee recognized the bidder mania that would define the day. Abandoning the usual bidding protocol, he instead asked the crowd for 50 percent or more above asking price -- and got it every time -- before launching into incremental bids.

The hoopla surrounding the major parcel rendered the second largest parcel, 355 acres south of Southern Highlands that sold for a respectable $50.5 million, almost an afterthought. Following a heated exchange of bids, Olympia Group drew applause for their winning bid. The parcel, located in a mountainous area, is only accessible via Southern Highlands, which Olympia Group is developing.

Compared with previous auctions, the proportion of bidders in the audience appeared greater. Many, in fact, did not stick around to watch the fate of the Henderson parcel. Boyd said there were 462 registered bidders -- far more than at any previous event, including several bidders of foreign origin. Many parcels drew bids from half a dozen or more parties.

For the first time, every parcel available at auction sold. In fact, all but two more than doubled in price from their starting bids.

To the surprise of many in the crowd, even a piece that the auctioneer labeled emphatically as inaccessible sold for $240,000 -- roughly seven times its opening bid of $35,000.

"All of you helicopter people, place your bids," McKee quipped at one juncture in the bidding.

As of Thursday, no bidders had defaulted, a problem at previous auctions. The BLM instituted a $10,000 deposit requirement to curb defaults.

Two more giant parcels go up for bid in January, one adjacent to the Aliante master plan in North Las Vegas and another along the state route leading to Kyle Canyon. Like the Henderson parcel, both require the buyer to enter a residential development agreement. None dared to speculate how much they might fetch.

"If the prices (increases on homes) hold, it's anyone's guess," Boyd said.

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